Alumil Rom Industry's (BVB:ALU) Shareholders Will Receive A Smaller Dividend Than Last Year

Alumil Rom Industry S.A. (BVB:ALU) is reducing its dividend to RON0.17 on the 25th of Julywhich is 15% less than last year's comparable payment of RON0.20. The yield is still above the industry average at 7.7%.

Alumil Rom Industry's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Alumil Rom Industry was paying out a very large proportion of what it was earning and 100% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

If the trend of the last few years continues, EPS will grow by 17.0% over the next 12 months. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 69% which would be quite comfortable going to take the dividend forward.

See our latest analysis for Alumil Rom Industry

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of RON0.64 in 2015 to the most recent total annual payment of RON0.20. The dividend has fallen 69% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Could Be Constrained

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Alumil Rom Industry has seen EPS rising for the last five years, at 17% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Alumil Rom Industry (of which 1 makes us a bit uncomfortable!) you should know about. Is Alumil Rom Industry not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.